Family Planning is a government program that is being debated by politicos regarding de-funding and elimination. One must remember that most government programs are built by and for politicos in order to further their political constituency building efforts. That once the wonderful and supposedly well meaning program comes into existence, eliminating such a program becomes next to impossible.

The White Queen and imaging six impossible things before breakfast

Why is it impossible to eliminate government programs? Its not impossible, its merely politically impossible. Politicos through the mechanism of government use tax payer dollars to create programs that create dependent political constituency. The now dependent political constituency of the particular program become a voting block for the particular sponsoring politico. Further, the massive bureaucracy associated with the program also becomes a voting block for the particular sponsoring politico. Hence eliminating any and all programs is a threat to particular now-dependent constituency, particular bureaucrats, and of course and most importantly the tax payer dollar funded voting blocks created by particular politicos.

Draconian

Family Planning elimination is of course framed as “draconian”. Those that require the continuance of any and all government plans immediately go to the chicken little axiom that the “sky is falling”. Those that rely on good intentions rather than results, those that support particular politicos, and those that find similar dependent constituency as kindred brothers (buyers, purchasers, readers, etc. of associated products/services) must continue the political constituency building effort. A prime example is a recent New York Times editorial entitled It Will Take More Than a Few Regrets:

‘Sightings are reported of that rarest of Washington species — Republican moderates. If only.

The Republicans in question are Senators Scott Brown of Massachusetts, Olympia Snowe and Susan Collins of Maine, and Lisa Murkowski of Alaska. The four voted in lockstep with the rest of their caucus in support of the House Republicans’ ludicrous and destructive budget-slashing bill. But then they put out word that they did not much like it that the bill had eliminated one popular and valuable government program: funds for family planning.’

‘ The real test will come soon. Will they reject their leadership’s calls for drastic cuts and draconian balanced-budget amendments so that the government can continue to operate? True moderates do not shut the government’s doors for the sake of ideology or cynical political gain’. (1)

One should take note that the particular editorial is totally notional. Its not a fact based editorial, its merely a notion based on the way things ought to be and consequently painting the world in one’s own self image. Very nice!

On no! A fact based question!

However, an excellent fact based question has been raised by Dr. Don Boudreaux of George Mason University regarding the basic question of funding such a program in the first place. Politics aside, Boudreaux poses the question: “And Which Part of Article I, Section 8 Authorizes Such Expenditures?” (2)

Ah ha! So you want the exact part that authorizes such expenditures?!? That can easily be found:

(1) please see made-up section entitled “We need to help you”,

(2) refer to sub-section 4 “You don’t know what is good for you but we do”,

(3) scroll down to paragraph (b): As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X.

(4) paragraph (b) then requires immediate reference to sub-section U812 which specifies: always determine what C shall do for X or, in the better case, what A, B and C shall do for X.

(5) section 5 then specifies that C be sent the bill.

Note: several times over the years this specific made-up section entitled “We need to help you” has been challenged in the Court of Supreme Special Knowledge. It has been determined that if X is stupid, C is even stupider for paying the bill.

Note 2: in the most recent challenge in the Court of Supreme Special Knowledge, C has come forth and decided not to pay (Enlightenment vs. Schumer, 2011). The ruling was immediate and decisive. You see, C is merely an “extremist” for not wanting to pay for the supreme imaginary rule: “We need to help you”. The ruling found its basis in tax. That is, tax money is not the tax payers its merely “Schumer Bucks“. That in fact it should be self evident that any challenge to tax and spend -or- spend then tax is heresy as it is counter to the axiom “You don’t know what is good for you but we do”.

For more information please see: The Forgotten Man, William Graham Sumner, 1883.

Wednesday, March 30, 2011

One might list the order of importance facing the US Government. Is it geo-political problems? How about a $3 trillion dollar deficit? $14 trillion dollars national debt? The US government barrowing $3 billion dollars every 30 hours? What about persistently high unemployment? 40 million Americans on food stamps? Unsustainable entitlements? Bankrupt states wanting a bail out?

Extreme

Nay! Nay! The order of importance is the word “extreme”. There are no problems, there is only politics!

‘Sen. Chuck Schumer can't spin his way out of this gaffe.

The media-hungry liberal leader yesterday accidentally revealed the inner workings of the Democratic Party's "extreme" p.r. machine -- hurting budget negotiations as both parties brace for an April 8 government shutdown.

Just before a conference call with reporters, Schumer (D-NY) was heard on the line giving his Democratic colleagues marching orders to spin the budget-battle story.

"I always use the word 'extreme.' That is what the caucus instructed me to use this week," the spin-master said in an effort to color Tea Party lawmakers -- apparently unaware reporters were already listening in on the call.’ (1)

‘Speaking to several Democratic colleagues Tuesday, Sen. Charles Schumer, the third-ranking Democrat in the Senate, said they should all use the word "extreme" when describing the budget cuts that Tea Party Republicans were seeking in the ongoing budget negotiations.’ (2)

‘The four Democrats on the call -- Sens. Barbara Boxer (Calif.), Richard Blumenthal (Conn.), Ben Cardin (Md.) and Tom Carper (Del.) -- dutifully followed Schumer's orders, using the word "extreme" at least a dozen times to blast Boehner and the Tea Party.' (3)

Its not your money, its his money

You see, its your tax dollars but its Chuck’s money to spend. Your tax dollars are merely a conduit to political power. Keep sending it and Schumer will keep spending it.

It didn’t really take the gaffe phone call to tell you what Chucky has been up to these oh so many years. Schumer merely takes your tax dollars and spends it on other people in order to build a dependent political constituency. When Chuck is not directly engaged in political constituency building he is busy rewarding rent seekers (special interests) with your tax money to indirectly build political constituency.

Schumer’s real problem is not the Tea Party, Republicans, or any other group. Chuck’s problem is his entire political constituency and consequently his political power and career is totally dependent on spending your tax dollars on other people.

Monday, March 28, 2011

Obama's socio-economic policy aka Obamanomics seems familiar? Just can't place the exact time and place? Try this one on for size.

The Gilded Age ended in the Panic of 1883 and a severe recession followed lasting until 1887. The Gilded Age was followed by The Progressive Era until 1920. Does the 1883 panic and severe recession until 1887 sound familiar to the demise of Lehman, the ensuing banking crisis, and present day? Keep this point in mind for a moment. (1) (2) (3)

Edward Bellamy and Milton Friedman

In 1887 Edward Bellamy wrote his fictional utopian novel Looking Backwards from 2000 to 1887. The book was a best seller. (4) Now see the following excerpt from Milton and Rose Friedman's book Free to Choose:

'The members of FDR’s brain trust were drawn mainly from the universities—in particular, Columbia University. They reflected the change that had occurred earlier in the intellectual atmosphere on the campuses—from belief in individual responsibility, laissez- faire, and a decentralized and limited government to belief in social responsibility and a centralized and powerful government.

It was the function of government, they believed, to protect individuals from the vicissitudes of fortune and to control the operation of the economy in the “general interest,” even if that involved government ownership and operation of the means of production.

Cradle to Grave. These two strands were already present in a famous novel published in 1887, Looking Backward by Edward Bellamy, a utopian fantasy in which a Rip Van Winkle character who goes to sleep in the year 1887 awakens in the year 2000 to discover a changed world. “Looking backward,” his new companions explain to him how the utopia that astonishes him emerged in the 1930s—a prophetic date—from the hell of the I880s. That utopia involved the promise of security “from cradle to grave”—the first use of that phrase we have come across—as well as detailed government planning, including compulsory national service by all persons over an extended period.’ Coming from this intellectual atmosphere, Roosevelt’s advisers were all too ready to view the depression as a failure of capitalism and to believe that active intervention by government—and especially central government was the appropriate remedy. Benevolent public servants, disinterested experts, should assume the power that narrow-minded, selfish “economic royalists” had ‘ abused. In the words of Roosevelt s first inaugural address, “The moneychangers have fled from the high seats in the temple of our civilization.” In designing programs for Roosevelt to adopt, they could draw not only on the campus, but on the earlier experience of Bismarck's Germany, Fabian England, and middle-way Sweden."

The New Deal, as it emerged during the 1930s, clearly reflected these views. It included programs designed to reform the basic structure of the economy. Some of these had to be abandoned when they were declared unconstitutional by the Supreme Court, notably the NRA (National Recovery Administration) and the AAA (Agricultural Adjustment Administration). Others are still with us, notably the Securities and Exchange Commission, the Na- tional Labor Relations Board, nationwide minimum wages.

The New Deal also included programs to provide security against misfortune, notably Social Security (OASI: Old Age and Survivors Insurance), unemployment insurance, and public assistance. This chapter discusses these measures and their later progeny.

The New Deal also included programs intended to be strictly temporary, designed to deal with the emergency situation created by the Great Depression. Some of the temporary programs became permanent, as is the way with government programs.

The most important temporary programs included “make work” projects under the Works Progress Administration, the use of unemployed youth to improve the national parks and forests under the Civilian Conservation Corps, and direct federal relief to the indigent. At the time, these programs served a useful function. There was distress on a vast scale; it was important to do something about that distress promptly, both to assist the people in distress and to restore hope and confidence to the public. These programs were hastily contrived, and no doubt were imperfect and wasteful, but that was understandable and unavoidable under the circumstances. The Roosevelt administration achieved a considerable measure of success in relieving immediate distress and re- storing confidence.

World War II interrupted the New Deal, while at the same time strengthening greatly its foundations. The war brought massive government budgets and unprecedented control by government over the details of economic life: fixing of prices and wages by edict, rationing of consumer goods, prohibition of the production of some civilian goods, allocation of raw materials and finished products, control of imports and exports.

The elimination of unemployment, the vast production of war materiel that made the United States the “arsenal of democracy,” and unconditional victory over Germany and Japan—all these were widely interpreted as demonstrating the capacity of government to run the economic system more effectively than “unplanned capitalism.” One of the first pieces of major legislation enacted after the war was the Employment Act of 1946, which expressed government’s responsibility for maintaining “maximum employment, production and purchasing power” and, in effect, enacted Keynesian policies into law.' (5)

Summary

Obama socio-economic policy is no more than a replay of a golden oldie. Somewhere between FDR policies and Edward Bellamy's utopia.

One point that never receives any press time is that in 1516 Sir Thomas More named his ideal social system “Utopia,” which is Greek for “no place”. (6)

Friday, March 18, 2011

"The bill calls for an end to all federal funding to NPR and its affiliates.

It also prohibits stations from using federal funds to pay NPR dues and to purchase programming. It would block NPR from applying for grants provided by federal agencies such as the Corporation for Public Broadcasting, Department of Education, Department of Commerce and the National Endowment for the Arts." (1)

Simple Proposition

The simple proposition is: what is the mission of government? What public goods should state offer? Would the list of public goods include radio and television broadcast?

Government has obviously gotten into the delivery of public goods that are very much in a gray area. However, radio and television is a competitive market with many, many, many outlets. Demand for a wide variety of content had spawned a supply of a wide variety of content.

In the gray area of government delivered public goods, public radio and television is the poster child. The market delivers the content demanded by consumers. Why would the government enter a market that smoothly functions in the area of demand and supply?

If people demand the content of NPR, then NPR can deliver such content or a competitor can offer such a service. That is to say, if the market actually exists for NPR's content, NPR can deliver such content in a free market place and other competitors will enter the market and deliver the content as well.

Neither the possible competitors nor NPR deserve or should require a subsidy in a highly competitive free market that delivers a wide variety of content. That is, if NPR requires and needs a subsidy then why doesn't all radio and television outlets require a subsidy? Why do radio and television outlets thrive in a free market without subsidy but somehow some way NPR needs a subsidy?

The Simple Answer to a Simple Proposition

The simple answer to the simple proposition is that particular politicos have decided to subsidize NPR. That a non-free market solution of government intervention and subsidy has been a chosen path of particular politicos. One might say that politicos chose winners and losers and NPR was been granted "winner status" with government subsidy.

One must remember, the particular politicos that have chosen the subsidy path are doing so with your tax dollars. Its a classic case of Milton Fiedman's fourth category of spending: other people (politicos) spending other peoples' money (taxpayer money) on other people (NPR). (2)

When you are young and look out upon life's horizon, you can not see the grim reaper. As time goes by and you gaze upon life's horizon you begin to see a silhouette that becomes more and more in focus and closer and closer. Yes, it's clearly the grim reaper! Yikes!

When the grim reaper finally comes to visit, he now has some competition in the form of a rent seeker known as hospice. No! No way! Way!

Yes, the visit from the grim reaper is a dollar sign signal for certain entities. Yes, that benevolent bunch from hospice wants you to use more of their services! Matter-of-fact they want you to be required to use their service! Believe it or not that group of self appointed spiritual beings, angels as they were, are now allies with the grim reaper. Ah, the evil of it all!

Below is a link to a New York Post article by Betsy McCaughey entitled Stop Telling Us Where to Die. You should take five minutes and read the article as rent seeking has gone to a new and astounding level. A zenith as it were. Excerpt as follows:

Hospice care isn't only a beneficial service for dying patients. It's also a $4.5 billion industry flexing its muscle in state capitals -- including Albany, where a state senator faces federal charges for taking hospice-industry bribes.

Since coming to America from Europe in 1974, the hospice movement has boomed -- and changed. Today, nearly half of US hospice agencies are for-profit -- and an astounding 42 percent of Americans who died last year were in hospice.

Despite this growth, the industry is pushing for laws that would lead to more patients using hospice care and for longer periods.

A New York law, enacted last August and in effect since February, compels doctors to offer information on hospice and other end-of-life options to every patient diagnosed with a fatal illness. Physicians who fail to offer the information risk fines of $2,000 for the first offense, $5,000 thereafter and up to a year in jail.

The Medical Society of the State of New York opposed the law, and many doctors are furious about it.

But on Monday, a state-appointed "Massachusetts Expert Panel on End-of-Life Care" proposed that the Bay State consider copying the New York law.

Four hospice-industry employees sit on the Massachusetts end-of-life panel, an obvious conflict of interest.

Helping terminally ill patients know their options is a best practice -- but the government shouldn't be dictating what is discussed between doctor and patient, especially not at the behest of an industry.

From an economics point of view, attempts rein in government spending and balance government budgets is in essence arguments to rein in spending and balance budgets of a collectivist organization. That is, the entire budget/operation of the government is in fact collectivist based and delivered through monopoly.

Hence the arguments to rein in the spending/balance the budget are basically arguments about the spending/budget of a collective based entity delivering its services through monopoly. However, its still a collectivist based organization regardless of spending patterns.

Spending is merely a symptom

Lets say you are successful in reining in spending and balancing a collective monopoly's budget. Then you have only succeeded in temporarily reining in the spending attributes of a collectivist based organization. That is, the real and basic problem is the collective itself and the monopolistic delivery system.

The collective will always accommodate rent seekers (special interests), will always suffer from the phenomena of "shirk", the purveyor of the public collective (politicos) will always attempt to use tax payer money for political constituency building through the mechanism of government as well as accommodate rent seekers, and the collective itself and purveyors of the collective will always attempt to solve its problems through additional monies (taxes).

Therefore, if you are successful in reining in spending it will be a temporary phenomena as the collective itself, by its very nature, will grind down the path of collectivism and seek more money to accommodate its attributes/organization/essence.

The collective monopoly, by, for and of the politico
If one was successful in reining-in and balancing the budget of an existing collective based organization the next step in to bust the collective monopoly. How?

It probably boils down to an observation by F.A. Hayek (paraphrasing): nowhere is it written in economics that the "state" must provide services. The state's obligation is to collect tax money. The services then can be provided by the private sector or state. State has chosen arbitrarily to provide services themselves in order to enlarge itself. The enlargement was done by, for, and of politicos for power. That is, the "state" doesn't think, discuss, or decide......only politicos think, discuss, decide. Politicos have decided to enlarge state by providing the services by the state as an avenue to additional power.

To bust the collective monopoly all services beyond protective services (police/fire) should be privatized when ever possible (which is the vast majority of the time) and the state's job is to merely collect tax and then pay for the public services rendered by the private sector. By busting the collective monopoly you create efficiencies which lower costs, lower rent seeking possibilities, lower “shirk”, lower political constituency building, and lower the power of politicos in general. Hence removing the collective monopoly is to remove the major cost driver.

However, to remove the cost driver of collective monopoly is to dismantle the politico's avenue to power. The politico has chosen to expand the state by delivering public services through a collective monopoly. The cost driver is of no meaning to the politico, the meaning is power.

(CNSNews.com) - Rep. John Conyers (D-Mich.), the ranking member of the House Judiciary Committee, told CNSNews.com today that the health-care law that President Barack Obama signed last March is a “platform” for building a single-payer health care system in the United States.

"The Obama administration told the Supreme Court on Monday night it should stay away from a high-profile challenge to the 2010 health care law until after a lower court has had a chance to review the case".

Tuesday, March 15, 2011

The link below is a video is from a January, 11, 2011 Cato Institute forum entitled: Fiscal Undertow: How Public Schools Are Drowning State and Local Budgets, and What to Do about It. (1)

Cato bills the video as follows:

"Health care is the budget buster at the federal level, but K-12 education is what's poised to bankrupt state and local governments. Spending on public education eats up around half of the general budget in most states, and it's by far the priciest single item. For every dollar raised by state and local governments for Medicaid, three dollars go to K-12 schooling. As a result, combined state budget gaps in the high tens of billions of dollars are predicted through at least 2012.

That's the immediate problem. Just over the horizon, things look worse. State public-employee pension systems are facing a trillion-dollar shortfall in their commitments, driven in large part by the massive costs of public-school employee benefits.

So exactly how bad is the education spending crisis? Is there anything we can do to avoid huge state and local tax increases or a serious decline in the breadth and quality of educational services?

Join us for a discussion of the most important state and local spending issue of 2011 ... and many years to come".

The video runs approximately 85 minutes and is extremely informative. You will find a grand discussion on true cost, unsustainable costs, distorted output and the monopolistic features of the current public school system. Further, a clear path is discussed on how to solve the cost/output problem of the current monopoly situation.

Monday, March 14, 2011

At the blog Our Dinner Table a recent post is entitled Keynesian Stimulus in One Sentence. The proposed definition is: We’re not sure why you are not spending your money, but we don’t like it, so we are going to spend it for you. (1)

That’s a most excellent definition!

Moreover, the proposed definition might lead one to say John Maynard Keynes economic propositions morphed, through neo-Keynesian and new-Keynesian followers, supporters, and advocates into a political proposition. That Keynesianism is no longer an economic proposition but a political proposition.

How so?

Keynesian deficit spending aka stimulus

Keynesian supporters love to refer to deficit spending by the politico-title "stimulus". That deficit spending by politicos [politicos through the mechanism of government] will somehow, some way [generally the lack of agregate demand argument] "jump start the economy". That government deficit spending will jump start the private sector and hence bring an economy out of recession. -Or-We’re not sure why you are not spending your money, but we don’t like it, so we are going to spend it for you.

Politicos in the candy shop

Many politicos love Keynesianism. Why? If we are going to spend more money it creates the perfect environment for political constituency building activities by politicos. Politicos through the mechanism of government can then satisfy rent seekers (special interests), expand existing entitlement programs or propose new entitlement programs, and to some extent offer up good old pork barrel spending to those voters in the home district. That is, the politico is handed the golden opportunity to exercise political constituency building through the mechanism of government by creating dependency groups, rewarding existing dependency groups, and spending other peoples‘ money on the electorate in the home district.

The lovely diagram of the "bucket"

The jump start stimulus theory always comes with the lovely diagram of the "bucket". The bucket represents demand. The bucket's content is household, business, and government demand for goods and services. A recession is a bucket that is not full to the brim. The bucket is no longer full as the demand components of households and businesses have shrunk and hence its the government's responsibility to increase its expenditures (increase its component of the bucket) in order to bring the bucket back to full.

Seems like common sense. However, the increased government expenditures that attempt to fill the bucket is really draining the bucket simultaneously. Its counterintuitive. As the government increases spending, private capital formation leaks out of the bucket [private sector capital formation being the main driver of private sector employment growth]. Hence you try and try to fill the bucket but it remains below the brim.

Once you stop filling the bucket with government deficit spending, you now must pay for the deficit spending. Hence Keynesians raise taxes. The taxes then create another leak in the bucket. Hence the bucket goes right back to the level that you began with before you started this wasted exercise.

Economics or politics?

Keynesians can never stop spending. This is the point of metamorphosis where an economic proposition becomes a political proposition. You see, each time you attempt to fill the bucket with deficit government spending, the size and scope of government increases. That is, a residual amount of government is added, an additional increment of size and scope of government, an entitlement here a rent seeker there, is added to the existing layers. A political constituency layer is added to the great pyramid scheme of political constituency building through: other people (politico) spending other peoples' money (tax payer) on other people (recipient class). -Or- Maybe its the fourth category of spending and a fifth category of spending: other people, borrowing other peoples' money, and spending borrowed money on other people. (2)

Paying back the deficit spending?

Wait! It gets better. When Keynesians raise taxes to pay for the deficit spending, part of the tax is to pay for the new permanent incremental layer of government aka political constituency enhanced or increased. That is, a permo-tax for the new permo-layer of political constituency.

Then as any good chocolate sundae of spend and tax/tax and spend would have it, a cherry must be added atop. The new tax level merely allows politicos additional revenue to spend. Rather than paying back the deficit spending, politicos through the mechanism of government merely spend more on government size and scope aka political constituency building.

Keynesians should wear the bucket over their political constituency building heads.

Saturday, March 12, 2011

In the realm of politics the "centrist" is the golden constituency. Political pollsters usually designate the "centrist" as the single largest political group. Voting-wise the "centrist" is the swing voter.

The Centrist Defined

According to the Wig Party, a centrist party, a centrist is:

Centrist- n. One who takes a position in the political center. That is the technical definition of a Centrist. One who takes a political position in the center? What is the center? A Centrist is an independent and someone who does not hold themselves to the party politics of the right or left. Being a Centrist allows you to have your politics a la carte, to have the freedom of political thought. A Centrist can support some liberal principles and some conservative principles while having the freedom to disagree with both. A Centrist cares about finding the right workable solution to a problem regardless of whose idea it is or whether it is from the right or the left or from anywhere else. (1)

The Centrist as a Politico

From the brief discussion above its clear that the centrist is a political entity. That is to say, politicos of the left and right make for two opposite political poles and hence the political middle is logically the center [centrist]. More succinctly, the left and right are political realms and hence the center is a political realm as well.

The "centrist" concept is generally offered as a rather simple politico proposition: black and white become gray in the middle. The south and north pole are marked by a mid-point known as the equator. The opposing goal lines of an American football field are marked by a midpoint of the fifty yard line.

The Centrist lives at the Political Center and Visits Both Opposing Political Positions

The political concept of the centrist is that he/she makes their home in the center yet visits both ends of the political spectrum and all points in between. Akin to a drive down route 66. They visit restaurants, see landmarks, laugh at billboards and return home with the best-of-the-best of their particular route 66 journey.

-Or- do they merely return with the best politics, the most persuasive politics, the best political promises of route 66? That is, if the "centrist" is framed and set forth as a political proposition then the centrist logically is interested in returning from their journey with political concepts, political arguments, and political propositions.

The Centrist Identity

The "centrist" concept has been long defined in political terms. Politicos of the left and right have defined the centrist in political terms and the centrist has consequently identified themselves in terms set forth by the opposing ends of the political spectrum. Its rather odd how the unaffiliated, the centrist, have adopted their label from exogenous entities. That is, they are not self described, they are externally described and accept the external label. That the opposing political poles, the north and south pole if you will, have designated the equator. That those living at the equator merely accept they are living at the equator (see Wig party definition above).

Which begs the question: why do those supposedly living at the equator not indeed look outward and designate what constitutes the north and south poles? Why do they allow themselves to be exogenously designated rather than designating themselves and others for that matter?

One might well say that the "centrist" is really a creation of politicos from the left and right and not a spontaneous political group that grew popular and self designated themselves "centrist".

Is Economic Man/Woman a Centrist?

We need to go back to the cruise down route 66. You see, the "centrist", as defined by politicos, merely searches the political spectrum for the best of all "political"worlds. Maybe, maybe not. Besides, what about the economics of the particular politics they encounter?

The first lesson of economics is that we live in a world of scarcity. There is never enough of anything to satisfy all those who want it. The first lesson of politics is to ignore the first lesson of economics. - Thomas Sowell

The centrist must then ask himself/herself: if he is a supposed centrist politico, is he then the centrist economic man?

Centrist Economic Man?

Can one be a centrist politico and a centrist economic man (woman)? Going back to the journey down route 66, the centrist politico supposedly brings back the best political notions from the left and right. However, economic man needs to take a separate journey down US 1, leaving behind the mystical world of "political notions" and journey down the highway of economics. That is, since the centrist is a political creation what about the economic creation?

Once economic man (woman) returns from their journey down US 1 they find two distinct poles exist in economics: centrally planned collectivism vs. individual freedom and free markets.

The political proposition of the centrist is that the centrist can collect political notional propositions from the left and right and pick and choose the best notional propositions. However, can economic man (woman) pick and choose economics from the realm of collectivism and somehow add those items to their desire to be free and enjoy the vast values created by free markets?

You see, "centrist" is basically a creation of, by, and for politicos and the implicit assumption is that centrist economic man exists inside of/along side of centrist political man.

Does Centrist Economic Man Exist?

For instance, we are going to collectively farm yet market the farm's yield in the free market? The collective is going to unionize every position yet have workers compete for jobs in a distorted labor market? Collectively central planned output is processed and you are merely left with the freedom to examine your hierarchy of unfulfilled needs? Collectively abandoned is the price system in favor of price fixing and you consequently have the freedom to choose among rationed goods?

The above propositions are absurd. Yet the absurdity is implicit in the political notion put forth of the existence of centrist economic man (woman) being the same as centrist politico.

Centrist Economic Man Doesn't Exist

One can clearly see that the implicit assumption by, of, and for politicos that centrist politico and centrist economist exist along side one another is fallacious. There is no equator between collectivism and free, self determined, self directed economic man (woman). Either you want the collective to determine your outcome or you want to determine your outcome. Either you want your economics determined by an exogenous authority or you want the economic authority.

Hence economic man (woman) is either left or right. Either collective or free. Meaning economic man (woman) doesn't exist in some gray-ish center world of collectivism and freedom.

The "Centrist" Doesn't Exist in Political-Economy

How can the political concept of the "centrist" exist in the realm of political-economy if there is no centrist economic man? Answer is the centrist doesn't exist in political-economy. One can not have centrists in political-economy as no equator exists. That is, political-economy is either left or right because centrist economic man doesn't exist. That political-economy arguments are either left or right and not "centrist" arguments.

The Politico Concept of "Centrist"

How can "centrist" exist even as a concept by, for, and of politicos? -Or- is "centrist" merely a contrived notional concept really meaning: undetermined electorate segment that can be swayed by notional political propositions. That is, no center exists for politicos, only a vast sea of unaffiliated who need convinced to affiliate with particular politico notional propositions. That the supposed equator of a political center is in fact a non-existent equator, merely a political line that needs moved notionally by the particular politico in their particular notional direction.

Thursday, March 10, 2011

If you recall the $787 billion(try $862 billion at last count) Obama deficit spending plan aka stimulus plan, you likely remember the claim that unemployment would not rise above 8% which in fact rose to 10%. Maybe you merely recall the enormity of the plan at $787 billion ($862 billion) plus future interest putting the grand total well beyond a trillion dollars. Maybe you remember the term “shovel ready”.

Remember the term “social engineering”? (1)

Bridge of Economic Security

One of the social engineering aspects of the stimulus plan was the awarding of large chunks of money to state governments to keep public sector employees on the payroll. The money was doled out over two years. In other words, an artificial bridge was produced with deficit spending (tax payer liability) to delay public sector layoffs.(2)

One thing to consider, historically speaking, when the US economy goes into recession the private sector begins layoffs immediately. However, the public sector begins its layoffs approximately twelve months after the beginning of the recession. Why? Governments plan their budget and fund those budgets one year in advance. Hence when the recession begins the public sector has budgeted and funded their budget with tax dollars well in advance of the recession. Moreover, once the recession is twelve months old and tax receipts have plunged, the public sector budget is adjusted downward to equal the new lower tax revenue volume at which point public sector layoffs begin.

Therefore the bridge of economic security for public sector workers was merely delaying or putting off into the future what would historically speaking occur in twelve months from the beginning of the recession. Why put off the inevitable? What if you think you can spend your way out of the inevitable? What if you think you can centrally plan a desired outcome at someone else’s expense?

A Bridge to Nowhere?

Politicos, through the mechanism of government, built a Keynesian deficit spending social engineering bridge and picked winners and losers regarding the bridge. One of the social engineering winners was public sector employees. Why? Public sector unions and associations lobbied their associated politicos for additional economic security. That is, organized public sector labor merely organized for their particular economic security against the disorganized mass of tax payers and to the detriment of the tax payer’s economic security. Hence the public sector and their associated politicos built a bridge of economic security for the public sector at tax payer expense.

Moreover, the bridge of economic security was produced to remove the threat of layoffs over two years for the public sector. The implicit and explicit assumption of the Obama deficit spending plan and consequential bridge of economic security for the public sector being that the economy would have recovered after twenty four months and tax revenues once again would be robust. That is, the economic assumption was that the $862 billion deficit spending plan would jump start the economy and after two years there would be no public sector layoffs as the economy would once again be robust.

However, the bridge of economic security became the bridge to nowhere as the economy did not recover in a robust manner as assumed by the stimulus plan’s Keynesian social engineering designers. Hence the bridge never reached the shores of robust economic recovery and robust tax revenue.

Its important to note that little attention would have been directed to the cumulative effects of public sector collective bargaining, its unsustainable path, had the Obama deficit spending social engineering plan succeeded. That is, some commentators in the past have pointed out the unsustainable path of cumulative total compensation produced by public section unions through collective bargaining. However, the issue would have remained in the background and continued to fester as politicos elected by and in association with public sector unions would have derailed any debate. Meaning that the hidden strategy of the social engineering deficit spending, spending specifically for an economic bridge of security for public sector unions, was in essence a strategy of pay me now and pay me later.

A Bridge Too Far?

The economic stimulus plan aka deficit spending plan was the grand design of central planning techniques. One likely remembers the grand charts and graphs of how the deficit spending would stimulate this sector and that sector. That future unemployment trends were shown graphically and how they would peak at 8% then begin a downward trend. Like any central planning scheme the central planners were so sure of themselves that they made bold prediction with their charts and graphs. And like all the central planners from the past, present, and future they were/are/will be frightfully wrong.

However, the assumptions used in the Spruce Goose of all stimulus plans ever concocted regarding the bridge of economic security for public sector employees were woefully short sighted. The single minded idea that in two years all would be well and public sectors workers could go on their merry way was ludicrous. What about state spending expanding at an extraordinary rate from the mid 1990’s until the demise of Lehman? What about two thirds of the states with continuing and constant financial problems? What about ballooning state debt? What about Medicaid eating up larger and large chunks of state tax revenue? What about woefully funded state unemployment insurance programs that immediately had to apply for loans from the federal government at the onset of recession? What about exploding public employee total compensation costs?

“The curious task of economics is to illustrate to men how little they really know about what they imagine they can design.” - F.A. Hayek

The Bridge of Sighs

The current problem for state legislators is that a bridge to nowhere or a bridge too far is of no interest to public sector unions. Regardless of the implosion of the bridge of economic security for public sector employees, regardless of the failure of the stimulus plan, regardless of the failure of the social engineering aspects, regardless of the failed predictions by the central planners - bridge or no bridge- there shall remain economic security for public sector employees or else.

Forget the billions of dollars thrown at the bridge of economic security for public employees, tax revenues be damned, budgets and accumulated debt be damned, the status quo for public sector employees will remain or else a tantrum to end all tantrums erupts. We won’t teach your children and we will not pick up your garbage. That is, the wonderful world of government monopolized services will come to a grinding halt. And to boot we will jam your capital buildings and sleep over if necessary.

You see, regardless of the billions upon billions upon billions of dollars already spent to ease the pain of public sector employees, well, that’s still not good enough. All past benefits will be retained. Period! Collective bargaining will be retained as public sector unions and associations know exactly how they obtained current benefits and how they will expand benefits in the future. Politicos will continue to be funded by these unions so the both-sides-of-the-table phenomena will continue and tax payer’s money will continue to be funnelled into greater and greater compensation levels for unionized/collective bargaining public employees.(3)

And who pays? You pay!

Government is the great fiction, through which everybody endeavours to live at the expense of everybody else. -- Frederic Bastiat

Summary

Current public sector union demands are made atop of the past bridge of economic security specially built for the exact same group. Public sector employees are earning approximately 25% more compensation than comparable private sector workers made possible through cumulative effects of collective bargaining against they tax payer's dollar. Gratefulness is not an option. More of the same is the only option. More and more, all at the tax payer’s expense. (4)

Tuesday, March 8, 2011

If you propose to spend $3.7 trillion dollars and have an income of $2.2 trillion dollars that is likely reckless budgeting. What if you spend more than you take in for twenty nine straight months. Is that reckless as well? What if you run a monthly deficit for February, 2011 of $223 billion [a new world's record for a monthly deficit....congratulations!], a monthly deficit by-the-way which is larger than the entire annual deficit for fiscal year 2007. Is that reckless budgeting?

The Art and Science of Non-Budgeting

If your intuitive answers to the above reckless budgeting questions were “Yes”, well you have another thing coming. You see, the answer is “No”. No way! Way!

You see, government budgeting is not a science. Government budgeting is not based on mathematics. Rather government budget is predicated on the money tree growing in your backyard. Yes, the money tree’s bounty is harvested by forest nymphs who magically turn the money tree’s bounty into pixie dust and all is well!

As a nice politico, the strategy is to spend money upon particular groups and thereby build a constituency that is dependent on the continual spending. Or simply put: its all for the children. Senator Durbin, notional proposition poster boy at large, states that if we were to cut spending we would be kicking kids out of school and ruin our infrastructure. Not to be outdone Senator Kerry, poster boy for marrying the proper amount of money, states cutting spending is just plain reckless. Finally, as a crescendo to spend, spend, spend, the wizard of constituency building Senator Schumer, quasi-economist at large, states cutting spending will cause a double dip recession.

In summation, by cutting spending, we will in fact fulfill the long known and empirical proposition of Chicken Little: the sky will fall!

Spending Rigidity

Why can’t we cut spending? If one builds a political constituency on spending other people’s money on other people, and the recipient class of other people’s money is in fact you political constituency, then cutting spending is reducing your political constituency. Nay, Nay! Can’t have that happen! Further, the recipient class of other people’s money i.e. you political constituency have become dependent on designated spending directed their way. Hence cutting spending merely sets off a Madison, Wisconsin type temper tantrum. Don’t underestimate that tantrum, as the sponsoring politicos are depending on that tantrum.

Necessary, Required, and Needed

Given the above mentioned political phenomena, enter the political-economy of necessary, required, and needed. What’s that mean? An implicit assumption in the continued hyper spending argument set forth by those who spend other peoples’ money on other people is: that somehow, someway, the current spending level is necessary, required, and needed. No empirical evidence is forth coming regarding “necessary, required, and needed” as it’s a notional proposition based on “the way things ought to be”. It’s a notional argument with no facts and is a central implicit assumption to the argument to spend more and more money. Watch carefully and note that all political arguments to “spend” come from the starting point of “necessary, required, and needed”.

Tax Then Spend or Spend Then Tax? Phase Two of Necessary, Required, and Needed

Politicos who’s existence depends on political constituency building through spending other people’s money on selected groups have two options: tax then spend or spend then tax. If the particular politico or group of politicos can’t raise needed tax revenue to spend on their particular constituency [can’t sell the notional proposition of necessary, required, and needed on a current basis] they merely opt for plan B which is to spend so much money that they then declare raising taxes is “necessary, required, and needed“.

Yes, you figured it out! “Necessary, required, and needed” is a political-economy argument set forth by politicos used in both realms: spending and taxing.

Monday, March 7, 2011

"The number of temporary healthcare reform waivers granted by the Obama administration to organizations climbed to more than 1,000, according to new numbers disclosed by the Department of Health and Human Services.

HHS posted 126 new waivers on Friday [03/04/2011], bringing the total to 1,040 organizations that have been granted a one-year exemption from a new coverage requirement included in the healthcare reform law enacted almost a year ago. Waivers have become a hot-button issue for Republicans, eager to expose any vulnerabilities in the reform law".- The Hill.com(1)

Sunday, March 6, 2011

Apparently David Gregory, yet another poster boy for Math Quest, doesn't want to understand that you can not cut a budget from point X if in fact point X has moved upward by $105 billion. That point X no longer exists.

You see, point X has now moved to point Y. Y being X + $105 billion. Hence Mr. Gregory, an apparent empty suit, wants to discuss/debate the nonexistent point X. Mr. Gregory, purveyor of mathematics extraordinaire, misses the entire mathematical point.

William Graham Sumner's Essay The Forgotten Man
William Graham Sumner was a famous nineteenth century economist and sociologist. (1) Sumner wrote the essay The Forgotten Man in 1883. The essay was widely read and widely quoted in the late 1800's. That is to say, the essay was quite famous. Even today the essay is widely read by economists and even managed to be the main title of Amity Shlaes recent book The Forgotten Man, A New History of the Great Depression. (2)

What Was the Essence of Sumner's Essay?Probably one of the better and simpler explanations is:

As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X… What I want to do is to look up C… I call him the Forgotten Man… He is the man who never is thought of. He is the victim of the reformer, social speculator, and philanthropist, and I hope to show you before I get through that he deserves your notice both for his character and for the many burdens which are laid upon him. - Henry Hazlitt (3)

Here is an alternate explanation update for the 21st century:As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed – with the praise of Y – to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X. As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law, but C is forced to comply with the new law. All this is done while Y looks on with glee and proclaims that A and B are so good for helping poor X.A is the politicianB is the humanitarian, special interest, do-gooder, reformer, social speculator, etc.C is The Forgotten Man (i.e. you, me, us)X is the downtrodden, the oppressed, the little guy, the misunderstood, etc.Y is the Mainstream Media (4)

What About Sumner's Formula in a "both sides of the table" environment?

What is the "both sides of the table" phenomena?

(1) if bureaucrat Q is negotiating with collective bargaining public sector union U, exactly what motivation does bureaucrat Q have regarding negotiations? The problem goes back to Milton Friedman's fourth category of spending: other people (bureaucrat Q), spending other people's money (tax payers money), on other people (recipient class which in this case is a public sector union). Therefore the bureaucrat has no motivation because he/she is spending other people's money not his/her own money,

(2) public sector unions have found that they can collect dues through members and funnel dues into political action funds. They then fund the campaigns of politicos that promise them [public sector unions] more compensation. They not only fund certain politicos but actively encourage their union members to campaign for the politico. Once they get their particular candidate elected they have now secured a politico who over sees bureaucrat Q. (5)

Going back to Sumner's formula and identifying the participants we find: The Forgotten Man is you (C).The politico is (A). However, due to the "both sides of the table" phenomena which occurs in collective bargaining by public sector unions, (B) and (X) become the same. That is, the supposed disadvantaged group is also the social reformer. (6)

The formula has morphed!Sumner identified (B) and (X) as two separate entities. However, in public sector unionized collective bargaining environment, through the "both side of the table" phenomena, (B) and (X) become one in the same. This does not negate Sumner's proposition, rather it takes Sumner's proposition to another level.

Disassociation
Since (B) and (X) have become one in the same i.e. (BX), the political-economy is for (BX) to disassociate the sub components (B) and (X) or else (C) might catch on to their duel role as disadvantaged/social reformer [the original formula which was stacked against (C) in the first place, has now become a stacked deck of cards in which (C) always and forever becomes the consequential, quintessential, and constant loser].
Hence BX's strategy is to show (C) that it is merely a suffering group (X) and consequentially a disadvantaged group seeking relief.

Moving from the Formula to the Formula's Yield

As one can see from above, The Forgotten Man is being duped not once but twice. Not only is The Forgotten Man drawn into assisting the supposed disadvantaged group through politicos associating with social reformers, but the disadvantage group itself is the social reformer!Summary

The Forgotten Man, the James and Jane Goodfellows of the world, are fed the argument that the disadvantaged group is in fact disadvantaged. That the wicked world has left this special group in need. Meanwhile, the supposed disadvantaged group functions as the social reformer. The social reformer in association with politicos vote to enhance the disadvantage group which in fact is the social reformer.

The recent actions and political-economy arguments surrounding the unrest in Wisconsin becomes the perfect example of the now morphed Forgotten Man formula. The unionized public sector employees march around the Wisconsin capital building with signs identifying themselves as the "disadvantaged", a special group that needs help. Arguments then come forth identifying the protest group as the "disadvantaged" while simultaneously and purposely leaving out of the debate/argument, that in point of fact, the same exact group is "the social reformer".
Moreover, examining Sumner's formula the exact same "disadvantaged" group is actually functioning in its duel role of social reformer. The social reformer/supposed disadvantaged group are one in the same. Purposely and methodically the social reformer/supposed disadvantaged group, through politicos, leave out their identity of simultaneously enhancing their supposed disadvantaged position.

Its the non-disadvantaged acting the part of the disadvantaged and perpetually enhancing their very own position through their duel role as the social reformer. Its the formula, stupid!

Saturday, March 5, 2011

Its long been argued that the present value of future public sector benefits, or what some characterize as unfunded liabilities (future cost of health-care benefits/future cost of defined benefit pension) are in essence an ever increasing claim against the stream of future tax dollars.

The implication is that as unfunded future benefits become more and more expensive to fund, more and more tax dollars are diverted from the stream of tax dollars to fund the benefits and less and less tax dollars are available for the actual business of government. Its further been argued that public sector debt held by bondholders is threatened as the stream of tax dollars must first be used for funding future benefits, then the remaining stream of tax dollars are used to provide the now reduced business of government, leaving an insufficient remainder to service past debt.

Should Unions Have the Power to Tax? - William Dunkelberg

William Dunkelberg, professor of economics at Temple University makes the case that private sector and public sector unions do in fact have the power to tax. How so?

“We have laws that prevent firms from exercising monopoly power and charging prices that are well above the real costs or value of production. But what if a group of workers conspires (usually with the help of government) to overcharge for their services at the expense of the larger public?

The UAW successfully used market power to raise their compensation above levels that the “market” was paying. In simple terms, they “taxed” individual purchasers of cars, extracting as much as $1,500 per car just for healthcare in addition to their higher wages, making it possible for union members to live better, but, dollar for dollar, buyers of cars to have less.”

“Only about 7% of the private workforce is unionized today, but their ability to “tax” union members through union dues and make political contributions gives them top priority in the White House today. Public sector unions represent about a third of public sector workers.

Here, we are held hostage by threats to not pick up our garbage or teach our children. Politicians, not facing a bottom line performance measure like GM or the steel companies but worried about re-election, give in to demands to keep voters from being unhappy. But, over time, this has produced a generally over-paid and over-benefited public sector workforce (compared to market wages).

Their generous compensation can only be supported by reducing the welfare of citizens through higher and higher levels of taxation. The “employers” (taxpayers through their elected officials) have slowly lost their ability to determine the terms of employment offers. The unions now determine working hours, hiring criteria, the quantity of “output” to be produced per day, the number of sick and vacation and holiday days, how their performance will be evaluated etc. No longer can the employer make an “offer” for a job with requirements that fit the needs of the public institution.

The workers themselves now determine these things through the exercise of union power.

Bottom line, union members get higher compensation than the market would pay, but dollar for dollar, that higher compensation comes out of the pockets of taxpayers and customers, leaving them worse off. These are not “high paying jobs” that reflect the value produced by the workers but instead reflect the power of the organized group to impose “pain and suffering” on unorganized individuals in society.

The prices companies can charge are disciplined by competition as is the wage I can earn offering my services in the marketplace. Unions seem to be exempt from this, granted the power to tax individuals to support the lifestyle to which they feel they are entitled. (1)

Unorganized Individuals in Society

One should take note and further reflect on the this statement by Dunkelberg:

“These are not “high paying jobs” that reflect the value produced by the workers but instead reflect the power of the organized group to impose “pain and suffering” on unorganized individuals in society".

Maybe there is something to this unorganized individual within society. Walter E. Williams, professor of economics at George Mason University, sheds some additional light on the “unorganized”:

With all of the union strife in Wisconsin, Indiana and New Jersey, and indications of more to come, it might be time to shed a bit of light on unions as an economic unit.

First, let's get one important matter out of the way. I value freedom of association, and non-association, even in ways that are not always popular and often deemed despicable. I support a person's right to be a member or not be a member of a labor union. From my view, the only controversy regarding unions is what should they be permitted and not permitted to do.

According to the Department of Labor, most union members today work for state, local and federal government. Close to 40 percent of public employees are unionized. As such, they represent a powerful political force in elections. If you're a candidate for governor, mayor or city councilman, you surely want the votes and campaign contributions from public employee unions. In my view, that's no problem. The problem arises after you win office and sit down to bargain over the pay and working conditions with unions who voted for you.

Given the relationship between politicians and public employee unions, we should not be surprised that public employee wages and benefits often average 45 percent higher than their counterparts in the private sector. Often they receive pension and health care benefits making little or no contribution.

How is it that public employee unions have such a leg up on their private-sector brethren? The answer is not rocket science. Employers in the private sector have a bottom line. If they overcompensate their employees, company profits will sink. The company might even face bankruptcy.

Of course, if private companies can count on federal government bailouts, as did General Motors and Chrysler, they can maintain a comfy relationship with their unions. No such bottom line exists in the government sector. Politicians have every reason to grant benefits to their political allies, in this case public employee unions. They don't pick up the tab; it's unorganized taxpayers who face higher taxes. (2)

The Aristocracy of Labor and the De-facto Aristocracy

Milton Friedman in his famous PBS documentary Free to Choose referred to unionized labor as “the aristocracy of labor”. That is, Friedman was pointing out a class of labor holding exceptional rank and privilege. (3)

The exceptional rank and privilege was gained through “rent seeking” and sponsored by politicos (the true aristocracy) through the concept of “political constituency building” in order for the politico (aristocracy) to perpetuate their class position as part of the lofty de-facto aristocracy. (4)

One then has to wonder who in the devil funds this hierarchy of aristocracy? Hmmm. Yes you guess it! You….. the unorganized tax payer! (5) The organized take advantage of the unorganized and create a hierarchy of aristocracy and all the while the unorganized are duped into funding the entire process!

The Political-Economy of the Organized Aristocracy Hierarchy and the Unorganized

Once in a great while a sea-change occurs in which the unorganized metaphoricallystorm the castle walls and want accountability, the end of the hierarchy of aristocracy, and no longer are they willing pay the tax collector the tribute needed to perpetuate the aristocracy class.

Oh but no! You see, being in the aristocracy is comfortable. Holding exceptional rank and privilege at the expense of the unorganized is the high life. (6)

Hence the hierarchy of the aristocracy must reshape the argument. The unorganized, now enlighten enough to be metaphorically standing outside the castle walls with torch and pitchfork in hand, are portrayed as the evil doers. It becomes time for the “organized” to show their organizational prowess!

The hierarchy of the aristocracy slips out the back gate of the castle and begins to protest the end of the hierarchy of aristocracy. You see, the debate must be reshaped. That is, the unorganized are really the evil doers. That the unorganized are mistaken and that you must pay tribute to the life style of the entitled as its your lot in life. That its blasphemy to believe other than what is written from on high. And what is written is that you pay and we receive.

That is, the hierarchy of the aristocracy is merely a fuzzy little white rabbit.

Debate: a discussion, as of a public question in an assembly, involving opposing viewpoints.

Insight: an instance of apprehending the true nature of a thing, especially through intuitive understanding; penetrating mental vision or discernment; faculty of seeing into inner character or underlying truth; an understanding of relationships that sheds light on or helps solve a problem.

“Civility” regarding political rhetoric and political discourse

In recent months a proposition put forth in the political arena has been “civility” regarding political rhetoric and political discourse. Some politicos point toward people supposedly acting in a violent manner due to heated political rhetoric. Other politicos say no connection exists between political rhetoric and exogenous violent events. Still other politicos point to the fact that US politics has never been “civil” and love to point toward the Jefferson -Adams uncivil statements/politics. Yet other politicos point toward continued uncivil rhetoric even after the issue of civility recently surfaced in the political arena e.g. Wisconsin protester rhetoric and Wisconsin democrats rants in the Wisconsin house.

Politicos and the debate environment

Don’t be fooled. One must remember the “civility” proposition is put forth by and for politicos. Politicos always want to shape the environment in which they debate. The current “call to civility” has nothing to do with civility and has everything to do with shaping a debate environment.

Debate vs. Insight

Regardless of civil debate or non-civil debate, politicos rarely have anything to offer remotely resembling insight. Debate and shaping debate environment has nothing to do with insight.

Hence politicos want to shape a debate environment, perform the political Kabuki dance of debate, point-counter point, and give us the normal politico results of zero insight and plenty of politico smoke laden hot air.

You see, since insight is not a politico strong suit, they merely act the part of politicos and focus attention on “civility”, a non-issue issue, direct media attention to “civility” and go about their merry way debating into infinity and beyond with exactly zero insight.

Politicos are Politicos

Politicos want James and Jane Goodfellow to focus on a non-issue issue, shape their own political debate environment, and continue with their 2,362,222 rendition of the Kabuki dance of debate providing their audience with a never ending sting of opposing view points all the while shedding no light on how to solve problems.

The Kabuki dance of debate is to divert your attention. Its frustrated actors, also known as politicos, providing you political entertainment while solving zero problems. Maybe the following quote puts the politico Kabuki dance of diversion-debate-entertainment into perspective:

Remember, every single second on television, no matter what the apparent content, is entertainment. - Don Luskin

Wednesday, March 2, 2011

State government tax revenue and associated state government spending was in fact related to the real estate bubble. Related in that much tax revenue was generated by the real estate bubble.

State government tax revenue and state government spending from 1995 until the demise of Lehman was related to the following two propositions:

(1) that politicos through the mechanism of government fueled the real estate bubble by creating public policy (community reinvestment act, Fannie and Freddie, etc.) that caused an inordinate amount of capital to be directed into residential and commercial real estate as well as causing marginal buyers to enter the market as these marginal buyers now qualified for loans of which they would not have qualified without government intervention into the market,

(2) that John B. Taylor’s book Getting Off Track is likely the most empirical explanation of the creation of a cheap money bubble by the Federal Reserve. That the cheap money bubble, in and of itself, set the stage (created the environment) for the ensuing financial shenanigans in the residential and commercial real estate markets, (1)

As the real estate bubble was in its many stages of bubbling-up, state tax revenue began increasing at an increasing rate. The tax revenues thrown off by the real estate bubble helped fill state tax coffers.

From the mid 1990’s until the recession of 2001 state governments increased spending in an unsustainable fashion. During the 2001 recession states suddenly found themselves with spending outpacing revenue and the alarm bells went off. Enter the Federal Reserve created cheap money bubble. (2)

As the Federal Reserve induced cheap money bubble played out the real estate bubble continued. As the bubble continued through its stages headed for its eventual collapse, the transactions associated with the bubble continued to throw off tax revenue to state governments.

Hence we have a real estate bubble beginning in the mid 1990’s and ending basically with the collapse of Lehman. We also have state tax revenues increasing in the mid 1990’s, dropping off momentarily during the 2001 recession, then marching on until the demise of Lehman.

Rent Seeking

During this period of increasing state government revenue “rent seeking” increased. What is “rent seeking”?

‘ "Rent seeking" is one of the most important insights in the last fifty years of economics and, unfortunately, one of the most inappropriately labeled. Gordon Tullock originated the idea in 1967, and Anne Krueger introduced the label in 1974. The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors. Elderly people, for example, often seek higher Social Security payments; steel producers often seek restrictions on imports of steel; and licensed electricians and doctors often lobby to keep regulations in place that restrict competition from unlicensed electricians or doctors.’ (3)

During this period of basically uninterrupted state government revenue growth, one stealth rent seeker was public sector unions. Hence increasing tax revenue of state government became a natural rent seeking target for public sector unions. With increasing state government revenues, union representatives of public sector unions lobbied, through rent seeking, for their supposed right to the increased tax revenue stream. The rent seeking activities of public sector unions is “stealth” in that:

(1) wage increases make too much headline hence the unions want additional employee benefits and retirement benefits as these benefits generally don’t make headlines like a “wage” figure makes headline,

(2) work place rules, sick pay, vacation time, etc. are buried in state employee manuals were the public have minor access,

(3) “total compensation” is then much enhanced yet the “wage” figure still seems somewhat reasonable.

What goes up must continue to go up and rent seeking rigidity

Rent seeking activities are not something granted by "government". Governments do not "think" nor grant benefits. Its important to remember thatpoliticos through the mechanism of government think and grant benefits.

Governments never learn. Only people learn. - Milton Friedman

Politicos that grant rent seeking activities generally due so through a phenomena known as political constituency building. That is, by granting rent seeking activities the selected beneficiaries then become supporters of the particular politico or group of politicos. Hence any reversing of the rent seek activity is opposed by the beneficiaries and hence opposed by the sponsoring/associated politico or group of politicos.

Taking back a rent seeking benefit, reversing such benefits, voids the concept of what goes up must continue to go up. You see, rent seeking activities are in no way related to Sir Isaac Newton proposition that what goes up must come down.

Politicos like to discuss "government tax revenue". That is, politicos love to label items in political terms. One must not lose sight of the fact that "government tax revenue" is really your tax dollar. Politicos love to lament special interest groups. Yet the same politicos grant rent seeking requests on a regular basis to build constituency.

About Me

BS Economics, cum laude, Private and Public Sectors, 1979, West Virginia University, Morgantown, WV.
Undergraduate Minor in General Insurance.
Chartered Life Underwriter (CLU), Huebner School of Economics, American College, 1992, Bryn Mawr, PA.
Life Underwriter Training Fellow (LUTCF), 1986, National Association of Life Underwriters, Washington D.C..
Currently enrolled and completed one half of Chartered Property and Casualty Underwriter (CPCU) from the American College.
38 years insurance industry experience.